Hidden 1099 Reporting Requirement changes

By June 29, 2010 Businesses

When you give Congress more than a thousand pages of a bill to hide things in, the results should be pretty obvious.  It is no different with the new Healthcare Bill.  But one of thew new 1099 reporting requirements will cost you big time and has nothing to do with health insurance.

Every year businesses have to go back through their books and prepare 1099-Misc forms for any non-payroll individuals who have performed services for them and were paid in excess of $600.  Since this requirement did not include 1099-Misc forms for other businesses, vendors, and so on (as long as they had their own Employer Identification Number) for many small businesses the requirement was minimal.  The majority of small businesses we work with had between 1 and 10 forms that had to be issued at the end of the year.  It is a pain, and a small expense, but it also allowed the IRS to have income reported to it on non-businesses who otherwise might get away with under-the-table income.

Slipped into the Healthcare Bill is a provision removing the exclusion for sending 1099-Misc forms to other businesses.  Starting in 2012, you will have to send a 1099 to any person or business entity who you pay more than $600 to.  That includes suppliers, restaurants, and retailers.  A small business who once produced 10 forms a year may now have to prepare more than 100.  You might find yourself having to produce these forms for Bestbuy or Ruth’s Chris.

For many, this change could put the cost of producing these forms from the hundreds of dollars into the thousands of dollars.

You can take steps now to prepare yourself for this 2012 change.  I recommend starting by making sure you are using an electronic bookkeeping solution such as Quickbooks or Peachtree that will allow you to track your vendors.  Next, go through your vendor database and be sure to eliminate duplicates and wrong entries.  This may be time consuming now, but it will save you time and money at the end of next year when you have much better things to be doing.  Finally, we recommend putting together a standard W-9 request packet that you can send to your vendors towards the end of next year so that you have all the information you need in order to meet the January 31st filing deadline for 1099-Misc forms.

On April 26, Republican Congressman Daniel Lungren filed legislation to repeal this requirement from the Healthcare Bill.  Whether that will happen is a bit of a stretch, but we will keep you posted.